Adam Smith in the Wealth of Nations (1776) was an early proponent of land taxes as was that great radical Tom Paine.
John Stuart Mill was an advocate and Henry George put the case in ‘Progress and Poverty’ (1879).
The economist David Ricardo gave us the concept of economic “rent” – that land or property derives its value from scarcity rather than investment.
In the debates before and after the peoples budget of 1909 both Winston Churchill and David Lloyd George argued strongly for the introduction of a land tax.
The economists John Kenneth Galbraith and Milton Friedman recommended Land Value Tax (LVT) for its fairness and intrinsic efficiency.
In recent years, prominent commentators have continued to argue for the introduction of LVT.
“Land value taxation is a no-brainer…It is both fair and efficient. It should be adopted” – Martin Wolf – Financial Times.
“The taxation of future growth in land values – to eliminate the fever of land speculation that has ended up destabilising the entire global economy… is what Labour should have done and should commit to in future.” – Polly Toynbee – The Guardian.
“The wealth produced over the centuries by the efforts of the community is reflected in land values and is therefore a proper target for taxation.” – Vince Cable in ‘The Case For A New People’s Budget’
“The underlying intellectual argument for seeking to tax economic rents retains its force.” – Mervyn King, in the standard textbook on the British tax system: Kay & King, 1990
The Mirrlees review of UK taxation proposes the conversion of business rates to a site value only base and reform of council tax. Sir James Mirrlees, who led the review, said that his findings showed that the current tax system imposes “unnecessary costs” on the economy.” There is no getting away from the political difficulty associated with some of the proposed changes. But there is also no getting away from the enduring costs of failure to reform,” he said.
How much money can it raise? Levied at a flat rate of between 0.5 per cent or 0.6 per cent it has the potential, based on the current value of land in the United Kingdom, which accounts for 38 per cent of our wealth, to raise between £30 billion and £35 billion. That’s enough to replace the council tax while also giving a tax cut to all those living in properties worth less than £350,000-£400,000.
The replacement of the council tax is long overdue. It is heavily weighted against the poor and the “squeezed middle”. Its eight bands lead to the absurdity of people living in properties worth half the national average paying half the tax of someone owning property worth £1 million or more. The council tax hits the poorest hardest. According to the Office of National Statistics, the poorest fifth of households pay 5 per cent of their household income in council tax. The middle fifth pay 3 per cent and the richest fifth pay less than 2 per cent.
* Joe Bourke is an accountant, former parliamentary candidate and Treasurer of Hounslow Liberal Democrats